IA: Funds achieve net inflows of £1.1bn in November as monetary outlook brightens

A potential end to interest rate hikes injected optimism back into UK investors, who favoured passive funds over their active counterparts

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UK savers put £1.1bn into funds in November as an improving monetary policy outlook injected optimism back into markets, according to the latest findings from the Investment Association.

The potential end to interest rate hikes by central banks, and the perceived potential for rate cuts in 2024, reinvigorated UK investors after they removed £1.5bn from funds over the prior two months.

Chris Cummings, chief executive of the Investment Association, said: “With inflation easing, there is a glimmer of hope on the horizon that we may see less restrictive monetary policy and cuts in central bank rates in 2024. The latest flow data suggests this has boosted both consumer confidence and wider market sentiment.”

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Most of the money investors put into markets in November went into passive funds. Index trackers received £2.7bn throughout the month – the highest inflow since April 2021. There is now £309bn held in passive funds as of the end of November, accounting for over a fifth (22.2%) of all funds under management.

In terms of sectors, funds in the IA UK Gilts, IA Infrastructure and IA High Yield Bonds sectors were the most popular in November, raking in £548, £241m and £190m in net flows respectively.

Despite the improved appetite of UK investors, funds in the IA Mixed Investment 20-60% Shares, IA UK All Companies and IA Short Term Money Market sectors were still unloved, facing outflows of £575m, £510m and £492m.

UK All Companies funds have not received positive monthly inflows since July 2021, during which time the sector has lost a sizable £19.3bn of invested capital.

Overall, UK savers put £3bn into funds over the year up until November, so they are continuing to invest – just not in their home market.

The IA figures follow research conducted by Portfolio Adviser earlier this month, which found that index-trackers were among the most-purchased funds of 2023. Data from Interactive Investor, published earlier this week, also found that interest rate-sensitive funds have markedly improved their returns since greater central bank optimism in November.

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